August 2016, Vol. 243, No. 8

Features

2016 Midyear International Construction Outlook

P&GJ’s 2016 survey figures show 47,693 miles of pipelines are planned or under construction. Of these, 19,115 miles are in the planning and design phase, while 28,578 miles are in various stages of construction.

The following reflect pipeline mileage in the six geopolitical regions discussed in the report: Africa – 1,739; Asia Pacific – 21,126; South-Central America and Caribbean – 5,440; Middle East – 5,604; Western Europe and European Union countries – 1,278; and the  Former Soviet Union and Eastern Europe – 12,506. For additional information on these and other pipeline projects, see P&GJ’s sister publication, Pipeline News.

 Energy Outlook

While low crude prices have plagued the industry for months and produced cheaper gasoline prices, lower prices are not good for everyone. They have negatively affected the oil and gas industry, and the economy in general. Oil and gas producers and companies throughout the energy industry have shelved planned development projects and hundreds of thousands of layoffs have occurred in virtually all sectors of the industry.

The U.S. Energy Information Administration’s International Energy Outlook 2016 forecasts oil prices as lower than those in last year’s Outlook, particularly in the near term. 

In the report’s reference case, the Brent crude oil price averages $37 bbl in 2016, increasing to $77 bbl in 2020 as demand and supply come into balance. After 2020, the prices continue to rise, as growing demand results in the development of more costly resources.

The Outlook’s annual average natural gas price forecasts a rise from the 2015 level, $2.62/MMBtu at the benchmark Henry Hub, to roughly $5/MMBtu in the mid-2020s through 2040. Technology improvements allow natural gas production to rise even as prices stabilize.

The report projects world energy consumption to increase by 48% over the next three decades, led by strong increases in the developing world, especially in Asia.

Africa

Oil and gas activity is being curtailed in several African nations due to pipeline theft, attacks on existing infrastructure and threats to oil and gas personnel. Nigeria, in particular, has been hard hit with a string of attacks on its oil infrastructure by militants. This, coupled with crude prices hovering in the mid-$30-45-plus range, has hurt economies in the region dependent on oil revenue.

As far as activity goes, Endeavor Energy is developing an LNG storage and regasification facility as part of the Songon Gas-to-Power project in Côte d’Ivoire. The greenfield development will consist of combined cycle gas to power generation with an integrated fuel solution, featuring purpose-built LNG infrastructure and a floating storage and regasification unit. The project is expected to add 375 MW to Côte d’Ivoire’s national grid.

Egypt wants to boost its natural gas production to between 5.5-6 Bcf/d by the end of 2019. The region contains 12 natural gas field development projects with price tags totaling $33 billion. A Reuters’ report indicated the three largest projects, which include the mammoth Mediterranean gas field Zohr discovered by Italy’s Eni last year, could bring 4.6 Bcf/d by early 2019.

Subsea 7 S.A. is under a contract from BP and partner DEA (Deutsche Erdoel AG) to develop the Giza, Fayoum and Raven subsea fields off Alexandria. This is the second phase of the West Nile Delta project in which field development will be at depths of up to 800 meters. The contract scope includes engineering, procurement, installation and pre-commissioning of the subsea infrastructure from 12 wells, with 50 miles of umbilicals and 136 miles of pipelines. It includes installation of export lines from the subsea location to the Idku terminal.

Offshore installation is scheduled in two stages. The first, in 2017, will comprise the landfall and shallow water pipelay; the second stage, in 2018, will involve installation of deepwater pipelines and execution of the SURF scope.

Off Angola, Technip and Heerema Marine Contractors are working for Total E&P on an offshore segment of the Kaombo Project. This includes engineering, procurement, fabrication, transport and installation of 18 rigid risers, including large buoyancy tanks, flexible top riser jumpers and riser base spools, about 186 miles of rigid pipe-in-pipe production and single-pipe injection pipelines. Completion is scheduled in the first half of 2018. 

Construction of the Uganda-Tanzania crude oil export pipeline is planned to start in January. Uganda’s Energy Minister Irene Muloni said the two countries agreed to fast-track the project which will cover 1,443 km, over 1,100 km of which will be on the Tanzanian side. The construction of the pipeline will Ugandan crude oil to the international market is planned to be finished by 2020.

Over 6.5 billion barrels of crude oil reserves from about 40% of the Albertine basin in western Uganda have been reported. Officials will meet in Tanzania) in October to start the front-end-engineering-design for the project, Muloni said, adding that feasibility studies estimate the project may cost $3.55 billion. Land acquisition assessments, surveys, environmental and social impact studies will be conducted before construction starts. The project was named the “East African crude oil pipeline (EACOP).”

Asia Pacific  

The Asia-Pacific Economic Cooperation’s latest Energy Demand and Supply Outlook, shows energy demand in the Asia Pacific region reaching 7,000 million tons of oil equivalent in 2040, rising 32% compared to 2013 levels, with China and Southeast Asia the main growth drivers, China accounting for over half of the growth. Aggressive, strategic efforts are expected to control demand growth over the next decade, flattening demand after 2030.

Not surprisingly, the Asia Pacific region accounts for 21,126 miles of new and planned pipeline projects, highest in the P&GJ survey.

 

Off Malaysia, the Shell/Technip-MMHE joint venture is developing the Malikai deepwater field and installing the area’s first tension leg platform (TLP). Onshore fabrication and commissioning of the Malikai platform is complete. The TLP has begun an 869-mile journey to the Malikai field off Sabah.

Contracted by TMJV, a joint venture between Technip and MMHE Shipyard, InterMoor Pte, was responsible for the marine aspects of the float-off and towing of the TLP through the Johor Straits into the Singapore Straits and to a float-off location for nearshore commissioning tasks to be performed. Once operational, the TLP will produce 60,000 bopd that will be piped 31 miles to the shallow water Kebabangan platform for processing. First oil is expected in 2017.

Engineers India Ltd. is building three natural gas pipelines totaling 2,486 miles for Gujarat State Petronet Ltd. Capacity of all three pipelines is 76.25 MMcm/d. They will carry gas north from the Krishna-Godavari basin off Andhra Pradesh. Construction should be completed in 2017.

Australia

While Australia’s LNG supply is heating up just as prices hit18-year-lows, the outlook remains solid, said Josh Frydenberg, Northern Australia minister for resources and energy. Despite his optimism, over $400 billion of proposed energy projects have been delayed since mid-2014, pushed into 2017 and beyond as oil prices slid about 60% in the past two years, according to consulting firm Wood Mackenzie Ltd.

Australia also accounts for several pipeline projects:

Jemena was selected by the Northern Territory government to build and operate the North East Gas Interconnector, which will be known as the Northern Gas Pipeline (NGP).The 387-mile pipeline will connect Northern Australia’s vast gas fields to the east coast gas market, running from Tennant Creek in the Northern Territory to Mount Isa in Queensland at a cost of about AU$800 million. Intertek will provide third-party inspection services to support the procurement of Jemena’s NGP Project. First gas is scheduled to flow by 2018.

Construction began earlier this year on the Esso-operated, 116-mile Longford to Long Island Point pipeline near Sale, Victoria. The pipeline, which replaces a pipeline built in 1969, will be constructed by Nacap Australia, a Quanta Services company. The pipeline is being constructed by Esso Australia as part of the Gippsland Basin Joint Venture in which Esso Australia Resources Pty Ltd and BHP Billiton Petroleum (Bass Strait) Pty Ltd. each have a 50% interest.

Western Europe & EU Countries

A total of 36 crude and natural gas projects are expected to start operations in the North Sea by 2025, with the U.K. responsible for 25, while nine will be located in Norway and the remaining two in Denmark, according to research and consulting firm GlobalData.

The company’s latest report, Production and Capital Expenditure Outlook for Key Planned Upstream Projects in North Sea, said of the planned projects, 31 will be for crude, while all five gas projects are to be undertaken by the UK. Key planned projects in the North Sea are expected to contribute 819,000 bopd and 1.1 Bcf/d of gas by 2025.

GlobalData’s report said the total capital expenditure incurred by key planned projects is may reach $86.5 billion with $43.4 billion anticipated to be spent during 2016-25. Norway is expected to lead the region in these areas, with spending of $27.8 billion.

Singapore’s Sembcorp Marine won a $1 billion contract from Maersk Oil to build facilities for the Culzean field in the U.K. North Sea. The development is 145 miles east of Aberdeen and may have the potential to meet 5% of U.K. gas demand by 2020-21.

In the Norwegian North Sea, Statoil awarded Saipem and Technip contracts on the Johan Sverdrup Project, one of the largest oil fields in the North Sea. Saipem’s work covers installation of a 97-mile, 18-inch gas export pipeline for the Kårstø gas terminal as well as about 175 miles of 36-inch oil export pipeline for the Mongstad terminal. The first phase of the project is targeted to be on stream in 2019.

Technip is also working for Statoil to fabricate and install 4.6 miles of 14-inch production pipeline and 9 km of 10-inch gas injection pipeline for the Oseberg Vestflanken 2 project. Installation is scheduled in the second half of 2017.

Middle East

The outlook for the Middle East remains positive. As the world’s largest oil-producing region, its share of global supply rises from 32% to 33% by 2035, according to BP’S Middle East Outlook. Moreover, oil production is projected to expand by 22%, with growth in Saudi Arabia, Iraq and Iran. Oil consumption is expected to rise by 42% from 2014-35. The region remains the world’s largest oil exporter with volumes rising from 20 MMbpd in 2014 to 23 MMbpd in 2035.

The Middle East accounts for 5,600 miles of new and planned pipelines. This includes work by Petrofac on phase one of Kuwait Oil Co.’s (KOC) Lower Fars heavy oil development program. The scope of work covers greenfield and brownfield facilities, and engineering, procurement, construction, pre-commissioning and commissioning. It includes a 100-mile pipeline to transport the heavy crude from the CPF to Ahmadi where KOC has the option to send it to the proposed Al-Zour refinery in southern Kuwait.

When fully operational it is expected that the initial phase of the Lower Fars heavy oil project will produce about 60,000 bpd of oil.

In Oman, Punj Lloyd won a $404 million EPC contract from the Oman Oil Refineries and Petroleum Industries Company and Oman Gas Company (OGC), which are owned by the government of the Sultanate of Oman and Oman Oil Company SAOC.

The work includes a new 14-inch, 186-mile NGL pipeline and a 32-inch, 186-mile gas pipeline. The 14-inch pipeline, part of Orpic’s $ 6.4 billion Liwa Plastic Industries Complex, will travel from the New Fahud NGL plant to the steam cracker unit in Sohar, Oman. Both pipelines are scheduled to be completed within 38 months. Punj Lloyd will also lay another 32-inch gas pipeline parallel to the existing 32-inch Fahud-Sohar pipeline for OGC to supply fuel for the power station.

Saudi Arabia and Bahrain have contracted with Al Robaya Holding Co. and the National Petroleum Construction Co. to build a 350,000-bpd, 72-mile oil pipeline between the two countries. Completion is scheduled for 2018.

Former Soviet Union, Eastern Europe

Russia continues its focus on exports with several pipelines planned that involve exports to China. According to Gazprom, construction of the Power of Siberia gas trunkline is on track: the Chayanda-Lensk-Olyokminsk section is under construction. Once completed, it will provide gas to the Russian Far East and China.

Gazprom, BASF, E.ON, ENGIE, OMV and Shell signed a shareholders agreement last year to construct the Nord Stream 2 gas pipeline system with capacity to transport 55 Bcma of natural gas from Russia to Europe through the Baltic Sea. Gazprom is confident both the Nord Stream 2 and Power of Serbia pipelines will be commissioned in 2019.

 

Work in this region is also centered on the BP-operated Shah Deniz Stage 2 project off Azerbaijan. Once completed, it will bring Caspian gas to markets in Europe for the first time. About $28 billion of investment will be required to produce the gas and transport it to the Georgia-Turkey border. From there, additional pipeline systems will deliver 6 Bcma of gas to Turkey and another 10 Bcma to markets in Europe.

Shah Deniz gas will ultimately travel 3,500 km to elevations exceeding 2,500 meters, and over 500 km of subsea pipelines will link the wells with the onshore terminal. This requires enhancement of some existing infrastructure and development of a chain of new pipelines which will form the final European leg of the Southern Gas Corridor.

This requires expansion of the existing South Caucasus Pipeline (SCPX) with a new parallel pipeline across Azerbaijan and Georgia, construction of the Trans Anatolian Pipeline (TANAP) that will transport Shah Deniz gas across Turkey, and construction of the Trans Adriatic Pipeline (TAP) to take gas through Greece and Albania into Italy.

All three projects are under construction. First gas is targeted for late 2018, with supplies to Georgia and Turkey. Gas deliveries to Europe are expected a year after first gas is produced offshore Azerbaijan.

South/Central America and Caribbean

The oil price collapse, dependence on exports and heavy debt load are largely blamed for several nations in the region experiencing a recession or being on the brink of one. In fact, the Business Times reported in June that Brazil’s state oil company, Petrobras, is close to selling an 81% stake in its Nova Transportadora do Sudeste SA pipeline network in Brazil for nearly $6 billion to a consortium led by Brookfield Asset Management Inc.

Work is winding down in the Caribbean on the BP/Trinidad and Tobago LLC project contracted to Technip to develop the Juniper project off the southeast coast of Trinidad. This comprises development of the Corallita and Lantana gas fields. Offshore drilling began in May 2015 and first gas is expected in 2017.

Tipiel S.A., Technip’s subsidiary in Colombia, won a contract from Consorcio Constructor Ductos del Sura for a pipeline to transport gas from the Camisea field to southern Peru. The project consists of 1,055 miles of 32-inch pipeline.

Technip won a contract from Libra Oil & Gas BV, a consortium of Petrobras Netherland BV (40%) and partners Shell (20%), Total (20%), CNOOC (10%) and CNPC (10%) to supply flexible pipes for the Libra field, located in Brazil’s Santos Basin pre-salt area. Libra is Brazil’s biggest oil field. First production is scheduled for 2017 with peak production of 1.3 MMbbl/d expected by 2030.

(Research and Markets has announced the release of the “Global Planned Oil and Gas Pipelines Industry Outlook to 2020 – Capacity and Capital Expenditure Forecasts with Details of All Planned Pipelines” report. The study is described as a a comprehensive report on major, trunk oil and gas planned pipelines industry in the world. For more information visit http://www.researchandmarkets.com/research/cprc7m/global_planned).